We Ran A Stock Scan For Earnings Growth And Ajooni Biotech (NSE:AJOONI) Passed With Ease

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Ajooni Biotech (NSE:AJOONI). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Ajooni Biotech

Ajooni Biotech's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Ajooni Biotech has grown EPS by 20% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Ajooni Biotech achieved similar EBIT margins to last year, revenue grew by a solid 45% to ₹740m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Since Ajooni Biotech is no giant, with a market capitalisation of ₹470m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Ajooni Biotech Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But the real excitement comes from the ₹5.0m that Chairman Jasjot Singh spent buying shares (at an average price of about ₹51.00). Strong buying like that could be a sign of opportunity.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Ajooni Biotech will reveal that insiders own a significant piece of the pie. Owning 47% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. Valued at only ₹470m Ajooni Biotech is really small for a listed company. So this large proportion of shares owned by insiders only amounts to ₹221m. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because Ajooni Biotech's CEO, Gursimran Singh, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations under ₹16b, like Ajooni Biotech, the median CEO pay is around ₹3.0m.

The Ajooni Biotech CEO received total compensation of only ₹540k in the year to March 2021. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Is Ajooni Biotech Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Ajooni Biotech's strong EPS growth. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. Astute investors will want to keep this stock on watch. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Ajooni Biotech , and understanding it should be part of your investment process.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Ajooni Biotech, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.